Mah Sing’s 3Q21 net gain above expectation


MAH Sing Group Bhd’s net profit of RM40.2 million in the third quarter of 2021 (3Q21), was above analyst expectations but below consensus. 

Maybank Investment Bank Bhd (Maybank IB Research) analyst Wong Wei Sum stated the property group’s 3Q21 earnings took its nine-month of 2021 (9M21) net profit to RM93.7 million or accounting for 126% and 63% of Maybank IB Research and consensus full-year estimates. 

“The variance in earnings could be due to its lower-than-expected marketing and operating costs,” Wong wrote in a research note on Mah Sing last week. 

The analyst noted Mah Sing is on track to meet its financial year 2021 (FY21) sales target of RM1.6 billion. 

As of 9M21, Mah Sing locked-in sales of RM1.28 billion or 80% of its FY21 target. 

“Mah Sing’s unbilled sales stood at RM2 billion as at Sept 21, which is 1.1 times of our FY22 revenue,” she added. 

Mah Sing has entered into a conditional sales and purchase agreement with Nation Holding Sdn Bhd to acquire 8.1 acres (3.28ha) of land in Kepong for RM95 million.

The land is purchased with the benefit of approved development order (DO) and 50% of the relevant development charges, deposit and contribution of Improvement Service Fund (roads and drains) pursuant to the DO paid by the vendor, Wong noted. 

The analyst views the land deal, which cost RM270 per sq ft (psf) or 12% of gross development value (GDV), as attractive. 

“The psf price tag is 32% lower than its previous land purchase, M Luna which has GDV of RM790 million, slated to be launched by 3Q22. 

“Assuming a pretax margin of 15% and four-year development period, we expect the project to enhance our FY23 earnings per share by three sen and revised net asset value by two sen,” she added. 

Maybank IB Research has a ‘Sell’ call on Mah Sing and kept its target price at 66 sen based on 0.5 sen FY22 price-to-book-value. 

The analyst raised Mah Sing’s FY21/FY22/ FY23 earnings forecast by 60%/0.2%/7% to factor in lower marketing and operating costs for FY21 and M Nova. 

“Our concerns remain on the glove business as the manufacturing division has reported RM12.3 million operating losses in 3Q21 (versus RM6.9m profit in 2Q21), and potential liquidated ascertained damages payment from The Meridin from its Medini project,” the analyst wrote.